Merck KGaA · XETR:MRK
Merck KGaA — Investor Day (2022)
48 slides from Merck KGaA's investor day presentation, 2022
Slide 1: Capital Markets Day 2022
Capital Markets Day 2022 Meet MeRck Management
Slide 2: Disclaimer
Disclaimer Cautionary Note Regarding Forward-Looking Statements and financial indicators This communication may include “forward-looking statements.” Statements that include words such as “anticipate,” “expect,” “should,” “would,” “intend,” “plan,” “project,” “seek,” “believe,” “will,” and other wor
Slide 3: Strategy Update
Strategy Update Belén Garijo, CEO
Slide 4: Agenda
Agenda 01 Focus on growth 02 Leveraging the business model 03 Outlook & Executive summary
Slide 5: Focus on growth
01 FOTUS ON growth RARREK
Slide 6: Uniquely positioned portfolio in fast-growing markets
Merck Group Uniquely positioned portfolio in fast-growing markets End markets1 Focus market areas1 BIG3 Global life science industry Biologics >10% PS ~5% to 7% CDMO >10% LSS Global pharma industry Oncology ~9% to 12% New HC ~3% to 6% Neurology ~7% to 9% Products Global electronics industry Semicond
Slide 7: Three innovative sectors serving patient and customer needs
Merck Group Three innovative sectors serving patient and customer needs Life Science Healthcare Electronics Diversified industry Global specialty Leading player leader innovator Process Solutions Oncology Semiconductor Solutions Leading product portfolio for bioprocessing, Focused leadership in SCCH
Slide 8: On track to deliver on our strategic promises
Merck Group On track to deliver on our strategic promises status: on track Introduced >€1 bn organic sales 2022 guidance for 6-9% org. sales growth well ahead GROUP growth p.a., ~80% from BIG3 Significant step-up in CAPEX 2022 guidance for €1.6 – 1.7 bn supportive GROUP towards ~€2 bn p.a. by 2023 I
Slide 9: BIG3 represent Merck's growth drivers, even stronger now
Merck Group BIG3 represent Merck’s growth drivers, even stronger now Process solutions + NEW Healthcare SEMICONDUCTOR Life Science Services1 Products SOLUTIONS ▪ Leading product offering for ▪ Focused leadership positions ▪ One of the strongest pharma manufacturing in Oncology, Neurology and portfol
Slide 10: Leveraging the business model
02 Leveraging the business model
Slide 11: What sets Merck apart - insights into the Strategic Framework
Merck Group What sets Merck apart - insights into the Strategic Framework II. Direction Efficient growth of BIG3, further leveraged by M&A I. Foundation Strongly resilient and III. Our DNA diversified business model. The foundation is key for Long-term focus driving our strategy with strong innovati
Slide 12: Unprecedented times reveal truly resilient business models
Merck Group Foundation Unprecedented times reveal truly resilient business models Resilience = Capacity to thrive in altered circumstances Execution Taking the right actions to capture opportunities and address challenges Fostering diverse ways of thinking and doing Foresight Ability to anticipate ▪
Slide 13: Holistic approach to resilience - backbone for sustainable growth
Merck Group Foundation Holistic approach to resilience - backbone for sustainable growth Leading Strong Founda- Lagging tional behind Strong balance sheet and sufficient cash reserves Peer group specific Low business cyclicality Lower fixed cost exposure Diversified customer allocation Supply chain
Slide 14: Realizing growth ambitions through strong cash generation
Merck Group Direction Realizing growth ambitions through strong cash generation ▪ Focus on cash is of high OCF grew >100% over the past years, strategic priority driven by focus on cash conversion ▪ Demonstrating over years and higher margins 579.9 being a reliable cash generator ▪ Basis for all gro
Slide 15: Mastering inorganic capital allocation
Merck Group Direction Mastering inorganic capital allocation Sigma-Aldrich Serono ▪ Bold moves ahead of time ▪ Spotless integration track record ▪ Multi-industry model enabling Millipore Versum long-term value creation AZ Materials Exelead Acquisitions Divestments 2005 2010 2015 2020 2022 Biosimilar
Slide 16: Doubling down on M&A to accelerate growth
Merck Group Direction Doubling down on M&A to accelerate growth M&A guardrails 1 M&A will fit strategic direction of the Group, with BIG3 as high priority 2 Approaching financial capacity of around €15 to 20 bn, acknowledging evolving interest rate and macro environment 3 Larger scale M&A an option
Slide 17: Driving innovation towards the next frontier
Merck Group Our DNA Driving innovation towards the next frontier Electronics Healthcare Life Science ▪ Enabling Semi ▪ Investing in R&D to capture the ▪ Leverage new datasets technology transitions, next wave of innovation ▪ Continue innovation and advanced analytics e.g. with integrated across mAbs
Slide 18: Product portfolio shift to increase positive sustainability impact
Merck Group Our DNA Product portfolio shift to increase positive sustainability impact 1 Dedicated to human progress Using our innovation power Progress through sustainable to support sustainability goals of science & technology by 2030 ▪ Merck ▪ our customers 2 R&D Creating sustainable ▪ society pr
Slide 19: Outlook & executive summary
03 Outlook & executive summary
Slide 20: Delivering an even more robust #25by25
Merck Group Delivering an even more robust #25by25 BIG3 to contribute to >50% of sales in 2025 M&A excluded Sales growth organic ~€25 bn >€1 bn per annum €19.7 bn BIG3 ~80% of growth + + + + >€1 bn >€1 bn >€1 bn >€1 bn CAGR organic >6% mid term BIG3 2021 2022 2023 2024 2025 Non BIG3 illustration 20
Slide 21: Underlying sector guidance strengthened by favorable outlook for the BIG3
Merck Group Underlying sector guidance strengthened by favorable outlook for the BIG3 Reconfirming 7-10% mid-term CAGR ▪ Strength of core business as key growth driver ▪ Confidence in target corridor even if pandemic-related LS sales fall to zero over time Maintaining guidance Reconfirming mid singl
Slide 22: Executive summary on strategy update
Merck Group Executive summary on strategy update shape grow innovate enable Uniquely positioned in Sustainable growth Pushing frontiers within Sustainable solutions for fast-growing markets >6% CAGR org. and among sectors customers and society
Slide 23: Financial Perspective
Financial Perspective Marcus Kuhnert, CFO
Slide 24: Agenda
Agenda 01 Enabling growth 02 Expanding on a solid foundation 03 Steering towards #25by25 04 Executive Summary
Slide 25: Enabling growth
01 Enabling growth DARREK
Slide 26: Track record of growth and profitability, amid cost discipline
Merck Group Track record of growth and profitability, amid cost discipline 36.6% 37.9% 31.0% 32.0% 29.8% 21.3% ▪ Above-market organic growth, org. sales growth LS paired with industry-leading margins 9.0% 11.8% 10.1% share sales growth BIG3 8.8% EBITDA margin ▪ Significant growth investments, LS org
Slide 27: Major CAPEX initiations since last CMD underline BIG3 growth ambitions
Merck Group Major CAPEX initiations since last CMD underline BIG3 growth ambitions ~2.0 1.6-1.7 - Darmstadt, invest ~€160 m Launch & Technology Center - Zhangjiagang (China), doubling investments in Semiconductor Materials, additional ~€150 m CMD’21 2020 2021 2022 2023 mid- term - Sheboygan, WI (US)
Slide 28: Diversification of manufacturing footprint strengthened further
Merck Group Diversification of manufacturing footprint strengthened further EMEA Americas Group sales: €6.3 bn APAC Group sales: €6.4 bn Group sales: €7.0 bn Major manufacturing sites Life Science Healthcare Balance of global and Electronics regional focus a key Recent expansion enabler of resilient
Slide 29: Expanding on a solid foundation
02 Expanding on a solid foundation
Slide 30: Altered economic circumstances pressure test for all industries
Merck Group Foundation Altered economic circumstances pressure test for all industries World Uncertainty Index 2022 Forecast revisions to growth Monthly CPI inflation, year-on-year 10 100% Advanced economies EMDEs 8 Downgrade 6 Unchanged 50% 4 Upgrade 2 0% 0 1990 2000 2010 2020 Advanced economies EM
Slide 31: We continually monitor resilience by quantified metrics
Merck Group Foundation We continually monitor resilience by quantified metrics Selected metric examples ▪ GHG emissions, ▪ Sustainability training Scope 1-3 rollout ▪ Waste score ▪ Impact to the ▪ Margin resilience ▪ Leverage >150 ▪ Water withdrawal, community ▪ Revenue growth ▪ Fixed to variable re
Slide 32: Multiple key strengths across resilience dimensions
Merck Group Foundation Multiple key strengths across resilience dimensions Major differentiating strengths ▪ Good financial position Well-positioned to both weather potential external disruptions (defense), exemplified by stable margins, capturing new growth opportunities (offense) ▪ Diversified por
Slide 33: Pursuing several areas to unlock growth
Merck Group Foundation Pursuing several areas to unlock growth Opportunities to capture growth ▪ Acquisitions and strategic collaborations to capitalize on value creation opportunities amid changing market conditions ▪ Continued digitization, creating data-driven insights and transparency ▪ Further
Slide 34: Track record in fast deleveraging enabled by high-quality cash flow
Merck Group Direction Track record in fast deleveraging enabled by high-quality cash flow 4.0 • Resilient sources of cash, especially PS, SLS and Established Portfolio (HC) 3.5 • Solid investment grade ratings: Moody’s (A3) 2.8 since 2021, S&P (A) since 2013, Scope Ratings (A-) since 2016 1.8 1.8 •
Slide 35: Financial M&A framework: Merck has sufficient headroom
Merck Group Direction Financial M&A framework: Merck has sufficient headroom Confirming dividend payout ratio Strong investment grade of 20% to 25% of EPS pre rating at all times Financing options by priority Net debt/ EBITDA pre 1 Cash corridor of 2.0x – 3.5x 2 Debt 3 Hybrid FY 2022 EBITDA pre guid
Slide 36: Steering to achieve our sustainability goals by targeted investments
Merck Group Our DNA Steering to achieve our sustainability goals by targeted investments Investment categories incorporating sustainability aspects R&D Sustainability Scorecard (2023) to R&D prioritize R&D projects leading to more Our sustainability guardrails are an sustainable products e.g. pilot
Slide 37: Steering towards #25by25
OS steering Cowards #250y25 DARREK
Slide 38: Confirming 2022 guidance despite inflationary pressures
Merck Group Confirming 2022 guidance despite inflationary pressures Drivers of H2 development 1 Expected EBITDA pre development in 2022 ▪ Group-wide: Varying comp effects [in € m YoY] driving difference in growth H2 vs. H1 illustration ▪ Life Science: Continued core business Continuous confidence st
Slide 39: Life Science: core business strength driving increased confidence in mid-term outlook
Life Science Core business strength driving increased confidence in mid-term outlook Process Solutions Diversified industry leader 7 to 10% Executing network expansion & CAGR regionalization (esp. single use, filtration) and enabling customer transformation ~80% of towards the factory of the future
Slide 40: Healthcare: growth driven by innovation, building on a solid established portfolio
Healthcare Growth driven by innovation, building on a solid established portfolio New products Global specialty innovator Mid single-digit ▪ Committed to drive Wave 1 CAGR launches Bavencio®, Mavenclad® and Tepmetko® ▪ Wave 2 expands with evobrutinib contribute to (BTKi) with FiC potential in RMS an
Slide 41: Electronics: significant progress on Level Up growth execution
Electronics Significant progress on “Level Up” growth execution Semiconductor Solutions A leading player CAGR 200 to 300bps2 above underlying 3 to 6% market of 5% to 7% CAGR Display Solutions vast majority CAGR of low single-digit decline with of growth1 return to growth until 2025 Surface Solutions
Slide 42: Executive summary
OU executive SUMMary DARREK
Slide 43: Executive summary on financial perspective
Merck Group Executive summary on financial perspective execute diversify ensure reconfirm Focus on margin Resilient setup with Steering investments Passion to deliver protection, capex strong cash flows within sustainability efficient growth expansion and M&A guardrails 43
Slide 44: Investor Relations contacts
CONSTANTIN FEST SVENJA DJAVAHERI PETRA HOLTZ Head of Investor Relations Assistant Investor Relations Assistant Investor Relations +49 6151 72-5271 +49 6151 72-3744 +49 6151 72-3321 [email protected] [email protected] [email protected] ADRIAN GORSKI GUNNAR ROMER FL
Slide 45: Life Science fireside chat
Capital Markets Day 2022 Life Science fireside chat Matthias Heinzel CEO Life Science
Slide 46: Healthcare fireside chat
Capital Markets Day 2022 Healthcare fireside chat Peter Guenter CEO Healthcare
Slide 47: Electronics fireside chat
Capital Markets Day 2022 Electronics fireside chat Kai Beckmann CEO Electronics
Slide 48: Slide 48